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Guaranteed life insurance products - Safe & Secure

If safety of your funds is what matters to you, try guaranteed life insurance products which offer assured returns too.

Lets check out the benefits:

IT’S a lesson that most people learn pretty early these days — there are no guarantees in life. Almost everything is a 50:50 game and to survive, you need to be ready for those days when the odds are weighed against you. But the irritation is much greater when the uncertainty involves money. With the stock markets still volatile, frustration and despair are becoming the predominant sentiment. Faced with the need to rekindle feelings of safety and security, life insurance companies have launched guaranteed insurance products.

SWEET TREATS

Guaranteed return plans are what one would call a two-in-one treat. On one hand, they offer what a normal life-insurance policy would in terms of covering you against unforeseen incidents like death. In addition, they also ensure that you are entitled to a fixed sum of money at the end of the maturity period. This is made possible as the companies invest in a series of fixed income products such as government securities, infrastructure bonds, corporate bonds, debt and money market instruments. This combination of benefits makes a guaranteed return plan a very attractive investment product for those with a mid to long-term investment horizon. A number of companies have launched guaranteed return policies in the recent past such as Jeevan Aastha launched by LIC, another plan launched by Aegon Religare and the India Bond plan by Aviva Life Insurance.

COUNT THE POSITIVES

The first is no doubt the assurance of fixed returns, especially in a period when returns from stock markets are far from the expected levels and even insurance products like ULIPs have recorded poor performances. In a guaranteed return plan, returns are calculated on a compounding basis over a fixed period of time and generally range between 6% and 8%. The plans generally have a long investment horizon of about 5-10 years. Also, for those who hate the thought of having to dole out a huge sum as tax, it makes sense to know that you are exempt from paying tax on the maturity amount. These plans usually offer tax-free returns under Sections 80C and Section 10 D. In fact, at the higher tax bracket, the annual return is much higher than any popular ‘safe’ investment product.

SIMPLE FEATURES

While the specific details vary from company to company, it is generally observed that most guaranteed return plans are single-premium products. This gives one the ease of making a down payment at the beginning of the policy instead of having to pay a regular premium every month. Explaining the reasons for a single premium, The net reduction from the premium is lesser in a single premium plan as the costs involved are lower. This ensures that there is more money available for the company to invest and generate the returns promised by them Most companies also do not allow for premium below Rs 50,000. Notably, the time period for which the policy is available is generally limited to about 45 days. Experts say this decision has been taken to reduce the effects of possible fluctuation in interest rates. Maximum age also generally revolves around 45 years, in some cases extending to a maximum of about 60 years.

MAKING THE CHOICE

Experts feel that before jumping into a plan of this sort, an investor must evaluate what he actually wants to achieve via the plan. As far as coverage is concerned, the death benefits are seen to decrease with every year into the policy. Moreover, when it comes to investments, there are other options in the market, which are offering competitive rates of interest and are also tax-exempt. You should looking at buying the product if the sum of tax-free returns and the premium to be paid for your term insurance is less than the returns that are promised by the guaranteed return product. To save yourself of worry, you must also make sure that you buy the plan from a company you trust even if it means compromising on the returns, he adds.

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